Source: Sina Finance
Kansas City Fed President Esther George said “the volatile week in the stock market” was to be expected, partly reflecting the impact of tighter monetary policy. Her support for a 50 basis point hike was unchanged.
“I think what we’re looking for is to convey our policy through market expectations, and tightening is expected,” George said in an interview on Thursday. “That’s one of the ways that financial conditions are tightening.”
The Fed raised interest rates by 50 basis points earlier this month, and Chairman Jerome Powell signaled that the central bank would take action of a similar scale at its June and July meetings, a plan both hawkish and dovish FOMC officials have championed .
“Inflation is so high now that we need a series of rate adjustments to bring it down,” she said. “We do see financial conditions start to tighten, so I think that’s something we have to watch carefully. It’s hard to know for sure how much tightening is needed.”
George used to be seen as a hawkish commissioner, but recently she has become more of a centrist. As a voting member in 2022, she sees no need to raise rates more than previously suggested.
“I think 50 basis points is a reassuring level,” George said. “The balance sheet reduction plan will help tighten policy. “We should act cautiously, make sure the impact of the rate hike is reflected in the economy, and then watch how things develop, that’s going to be my real focus.”
“What’s more important to me is when we see inflation stabilizing and then decelerating, which will tell us what monetary policy measures are needed,” she said.
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